Good stuff xbox, thanks for putting in all this effort. I think the experience of the early 80s can also be interpreted that the inverse relationship between interest rates and asset prices is not written in stone.
GZZ alluded to one possible reason why, which I’ve always been partial to. Buying a house is prepaying your rent for life, and thus, eliminating the risk of rental inflation. So the value of home ownership should (all other things equal) be higher if people are expecting high rental inflation, and lower if they are expecting low inflation. This factor would INCREASE values (again, all things equal) during periods of high inflation*, and decrease them during low inflation. This could partially offset the intuitive relationship between rates/monthly payments and prices.
* (what matters here is future inflation expectations, not trailing inflation… but people being natural extrapolators, the former usually just follows the latter).
